The BVI Financial Investigation Agency as a Special Institution Regulating the Financial Services in the Territory

In the last published blog concerning Kenneth Baker's Presentation on Risk-Based Approach, we have mentioned the BVI Financial Investigation Agency as an organization to report on suspicious transactions or activities in the field of financial services. In this posting, we will talk on the general role of BVI FIA, and the structure and the main responsibilities of this organization.

The BVI Financial Investigation Agency was established by the Financial Investigation Agency Act, 2003 as an autonomous law enforcement institution and a special arm of the Government of the BVI in relation to the Territory's position as an International Offshore Financial Centre. The organization thus replaced what used to be referred to as the British Virgin Islands Reporting Authority.

The BVI FIA is generally responsible for the investigation of serious financial crimes and money laundering offences taking place within or from the BVI territory. It also processes requests for legal assistance from authorities in foreign jurisdictions, which appear to the FIA to have the function of making such requests. The Agency acts as receiver of all disclosures of information required to be made pursuant to the relevant financial services legislation.

The FIA is not a revenue generating body; it is currently financed jointly by grants from the BVI Government and the Financial Services Commission (FSC). The FIA is directly responsible for managing its own budget which is ultimately approved by Executive Council.

The general purpose of the organization is to have financial and business sectors free of money laundering and other major financial crime. For this, the Agency endeavors to work actively, safeguarding the integrity of Territory's financial sector while contributing to the global fight against money laundering and other financial crimes.

Kenneth Baker's Presentation on Risk-Based Approach in Financial Services

In autumn 2007, Deputy Managing Director Mr. Kenneth Baker's speaking was discussed twice. It was described that on October 16, the BVI Financial Services Commission published 2 presentations of Kenneth Baker that regarded the amendments to the BVI corporate legislation and on the Private Trust Companies Regulations.

Recently, another interesting presentation of Deputy Managing Director Mr. Kenneth Baker was published on BVI FSC site. The presentation is entitled Emerging International framework for Financial Services - Risk-Based Approach.

In his presentation, Mr. Baker disclosed the main purposes of risk-based approach and its benefits and challenges as well as described the Risk-Based Approach itself.

What seemed the most interesting to me was the descriptive part where Deputy Managing Director has structured and described in simple words the Customer Due Diligence procedures.

What does the BVI Financial Services Commission expect from Licensee?
1) Licensee must develop procedures to identify and verify identity of each customer and beneficial owner, as well as obtain appropriate information to understand customers business and transactions.
2) Licensee should apply differentiated approach based on predetermined risk levels. There are 3 recommended levels of Due Diligence requirements:
a) Increased Due Diligence for determined Higher Risk customers (correspondent banking, politically exposed persons, specific geographic location);
b) Reduced Due Diligence for Lower Risk cases (publicly listed companies and regulated financial institutions, individual where main source of funds comes from salary, transactions involving de minimis amounts);
c) Standard Due Diligence to Rest of customers.

Mr. Kenneth Baker emphasized that suspicious transaction reporting is critical for the BVI to combat money laundering, terrorist financing and other financial crimes and that reporting a suspicious transaction or activity to the BVI FIA is mandatory, but he also pointed out that, to make the system, there should be thresholds below which an activity will not be reviewed.

It should be also noted that a substantial part of the presentation was dedicated Training and Awareness as well as Internal Controls Framework.